What Happens Next

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The crisis was caused by rising interest rates. The solution will be a reversal of this policy. Expect:

1. 0.5% cut in the Fed's interest rate in Sept, followed by a similar cut the next month, and the next until the stock market jitters end

2. Expect another miraculous cut in the UK's CPI next month, what about 1.5%? This will then pave the way for base rate cuts in the UK

3. No credit crunch. Recent events have created the mother and daddy of moral hazards. There is no penalty for doddy lending, only bail outs. Banks will carry on making money out of state sponsored one-way bets.

4. No credit crunch = accelerating HPI in both the UK and the USA

5. Sterling and the dollar will not fall. Japan and China do not want their currencies to appreciate against countries that they export too. Both countries run massive trade surpluses. They also have their noses in the trough. No more mortgage defaults in the USA, caused by rapidly falling interest rates suddenly make CDO's etc profitable again. Japanese and Chinese investors also benefit from one-way rigged market bets.

6. Inflation- 13% growth of the UK money supply, combined with 3% UK GDP growth should result in 10% inflation, but will it? CPI fiddled data? But more importantly, most of the goods we buy in the UK are imported from Asia. Asia's capacity is more important when considering demand-pull inflation. Asia is growing at 7%+, so inflation might not be a problem